A sweeping review of the Defence Department has proposed "transformational change" of the sprawling organisation, the sale of real estate including 17 major sites worth up to $1.4 billion and the axing of between 1000 and 1650 public servants.

The federal government has accepted 75 of the 76 recommendations made by the Peever Defence review, which will be implemented over the next two years. Photo: Rob Gunstone

The release of the Creating One Defence review was immediately clouded by confusion with the official report claiming 1000 public service jobs - including 650 middle management positions - would go. But an accompanying "First Principles Review - Question and Answer" sheet claimed 1650 people would be axed.

Defence Minister Kevin Andrews said the public service workforce within the department would, over time, continue to shrink and that the "net outcome will be less than that [up to 2000 jobs], we think around about the order of 1000".

"We're probably looking at, we're down to I think about 19,000 at the moment. We think that trajectory, which as I said started in 2012, will probably end at around the 17,000 to 18,000 mark, but that's not taking into account any future decisions made in the Defence white paper in terms of what other capabilities we need and the context of this, of course, is that the government is committed to returning the Defence budget to 2 per cent of GDP and I reiterate that commitment today," Mr Andrews said.

A spokesman for the minister subsequently told Fairfax Media the 1650 figure was correct. That figure does not appear anywhere in the report.

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The "first principles" review is the most thoroughin four decades and calls for a restructure of the department to cut waste and simplify processes. To address concerns Defence is too top-heavy, one three-star general position will be abolished, along with six senior executive service positions in the upper reaches of the public service.

There are currently seven three star generals in Defence, up from four in 1998, while the number of senior executives has ballooned from 87 to 174 in the same period.

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The minister said the review found a "proliferation of structures, processes and systems with unclear accountabilities, which in turn cause institutionalised waste, delayed decisions, flawed execution, duplication, over-escalation of issues for decision and low engagement levels amongst employees".

"This review propose a transformational change across Defence to ensure that it can deliver on future requirements that will be outlined in the government's forthcoming white paper and related documents."

Some of the other 76 recommendations include:

the retention of the Defence "diarchy", which establishes the Chief of the Defence Force and the secretary of the Department as equal partners

policy and intelligence functions be combined under a deputy secretary for policy and intelligence who reports to the CDF and secretary

increased spending approval thresholds to speed up processes, with ministerial approval required for project costing up ot $20 million, two ministers for projects above $100 million and cabinet approval for projects worth more than $250 million

the Defence Materiel Organisation (DMO), which purchases equipment for the department, will be abolished and a new capability and sustainability group established

the Defence Science and Technology Organisation (DSTO) to be folded into the capability group

greater powers for the vice chief of the Defence Force, including the power to stop projects

Overall, the government has accepted 75 of the 76 review recommendations, which will be implemented over the next two years. The DSTO recommendation has not been rejected but will be studied in more detail.

Mr Andrews said a timeframe would not be placed on the sale of the 17 sites identified in the 2012 Future Defence Estate Report.

The report noted: "A conservative net present value estimate of the disposal of these sites over 30 years is $1.4 billion, including property sales of $570 million ... but this does not take into account future maintenance savings."

There were 56,607 men and women serving in the Defence Force in 2012-13, 20,708 reservists and about another 19,000 public servants in the department. Those figures include about 7000 people in the DMO.

Former chief of army Peter Leahy, former Howard government defence minister Robert Hill, the former chief of defence company BAE Jim McDowell and former Labor finance minister Lindsay Tanner were also part of the review panel.

Those panelists will now form an oversight board to ensure the review's recommendations are implemented.

The review effectively proposes the biggest overhaul of the department since former Defence department secretary Arthur Tange rationalised and brought the different Defence services under one banner.